Sonoma County wins round in energy retrofit lawsuit

Lawsuits brought by Sonoma County and the state over new federal rules that the agencies say undermine government-financed energy retrofit programs can go forward, a federal judge has said.

The lawsuits target the Federal Housing Finance Agency, which last year ordered mortgage giants Fannie Mae and Freddie Mac to clamp down on lending for homes and jurisdictions associated with the retrofit programs.

Federal housing officials said the property liens and tax assessments used by such programs to pay off the cost of retrofits represented a risk to lenders in the event of a mortgage default. They ordered Fannie and Freddie to reduce and restrict new lending and sales activity with homes participating in the programs.

But retrofit program providers say the default risk among their participants was overstated and that the tighter lending rules have scared off applicants, leading many governments to end or suspend their programs.

Sonoma County, which established the nation's first ongoing countywide retrofit effort for homes and businesses, briefly suspended its program last summer after the rules were issued.

Since its resumption, the program has had a 40 percent decrease in activity, including contracts and applications. Applications alone last month plummeted to the lowest level since the program started in March 2009, a drop county officials also credited to new, tighter state energy standards for retrofit programs.

The county sued the federal housing agency last year over the new lending rules, joining the state, the Sierra Club and several other local governments that have filed their own lawsuits over the issue.

U.S. District Court Judge Claudia Wilken last week ruled that those cases can move forward on most grounds.

She dismissed a Sonoma County request to have the new rules immediately struck down. But she also ordered the federal housing agency to provide notice and take public comment on its rulemaking, a step it did not take last year before issuing the orders to lenders.

County leaders expressed hope that that process would result in "more nuanced" rules that are less of an obstacle to the retrofit programs.

"We do look forward to this opportunity to present the data that we've seen generated by the Sonoma County Energy Independence Program," said Efren Carrillo, chairman of the Board of Supervisors.

He called Wilken's ruling "a welcome first step."

Other claims that the federal housing agency violated administrative procedure and environmental laws in preparing the rules can also move forward, Wilken said.

The next court date in the cases is a settlement conference set for Sept. 12.